DERIVATIVES AND HEDGE ACCOUNTING (Tables)

3 Months Ended

Mar. 31, 2022

DERIVATIVES AND HEDGE ACCOUNTING

Notional amounts and fair values of derivative instruments

	March 31, 2022								December 31, 2021
	Gross Derivative Assets				Gross Derivative Liabilities				Gross Derivative Assets				Gross Derivative Liabilities
		Notional		Fair		Notional		Fair		Notional		Fair		Notional		Fair
(in millions)		Amount		Value		Amount		Value		Amount		Value		Amount		Value
Derivatives designated as
hedging instruments:(a)
Interest rate contracts	$	242	$	3	$	918	$	28	$	265	$	5	$	895	$	11
Foreign exchange contracts		7,522		571		3,276		195		5,431		467		5,828		197
Derivatives not designated
as hedging instruments:(a)
Interest rate contracts		51,215		4,000		53,844		4,376		47,499		3,868		42,113		3,622
Foreign exchange contracts		11,132		833		6,672		470		7,905		722		9,997		524
Equity contracts		26,873		403		4,250		55		27,423		681		5,091		53
Commodity contracts		196		3		138		-		303		4		219		-
Credit contracts(b)		2,789		1		933		45		3,790		1		936		47
Other contracts(c)		44,152		14		-		-		43,892		13		51		-
Total derivatives, gross	$	144,121	$	5,828	$	70,031	$	5,169	$	136,508	$	5,761	$	65,130	$	4,454
Counterparty netting(d)				(3,295)				(3,295)				(2,779)				(2,779)
Cash collateral(e)				(1,877)				(1,478)				(2,139)				(1,089)
Total derivatives on Condensed
Consolidated Balance Sheets(f)			$	656			$	396			$	843			$	586

(a) Fair value amounts are shown before the effects of counterparty netting adjustments and offsetting cash collateral.

(b) As of March 31, 2022 and December 31, 2021, included CDSs on super senior multi-sector CDOs with a net notional amount of $94 million and $97 million (fair value liability of $31 million and $30 million), respectively. The net notional amount represents the maximum exposure to loss on the portfolio.

(c) Consists primarily of stable value wraps and contracts with multiple underlying exposures.

(d) Represents netting of derivative exposures covered by a qualifying master netting agreement.

(e) Represents cash collateral posted and received that is eligible for netting.

(f) Freestanding derivatives only, excludes embedded derivatives. Derivative instrument assets and liabilities are recorded in Other assets and Other liabilities, respectively. Fair value of assets related to bifurcated embedded derivatives was zero at both March 31, 2022 and December 31, 2021. Fair value of liabilities related to bifurcated embedded derivatives was $10.3 billion and $14.5 billion, respectively, at March 31, 2022 and December 31, 2021. A bifurcated embedded derivative is generally presented with the host contract in the Condensed Consolidated Balance Sheets. Embedded derivatives are primarily related to guarantee features in variable annuity products, which include equity and interest rate components, and the funds withheld arrangement with Fortitude Re. For additional information see Note 7.

Gain (loss) recognized in earnings on AIG's derivative instruments in fair value hedging relationships in the Consolidated Statements of Income

	Gains/(Losses) Recognized in Income for:
	Hedging		Excluded		Hedged
(in millions)	Derivatives(a)		Components(b)		Items		Net Impact
Three Months Ended March 31, 2022
Interest rate contracts:
Interest credited to policyholder account balances	$	(21)	$	-	$	23	$	2
Net investment income (loss)		1		-		(1)		-
Foreign exchange contracts:
Net realized gains/(losses)		109		42		(109)		42
Three Months Ended March 31, 2021
Interest rate contracts:
Interest credited to policyholder account balances	$	(4)	$	-	$	6	$	2
Net investment income (loss)		8		-		(7)		1
Foreign exchange contracts:
Net realized gains/(losses)		32		(29)		(32)		(29)

(a) Gains and losses on derivative instruments designated and qualifying in fair value hedges that are included in the assessment of hedge effectiveness.

(b) Gains and losses on derivative instruments designated and qualifying in fair value hedges that are excluded from the assessment of hedge effectiveness and recognized in income on a mark-to-market basis.

Effect of AIG's derivative instruments not designated as hedging instruments in the Consolidated Statements of Income

	Gains (Losses)
Three Months Ended March 31,	Recognized in Income
(in millions)		2022		2021
By Derivative Type:
Interest rate contracts	$	(613)	$	(1,545)
Foreign exchange contracts		236		(87)
Equity contracts		(204)		(519)
Commodity contracts		(4)		-
Credit contracts		(1)		(5)
Other contracts		18		15
Embedded derivatives		5,285		4,839
Total	$	4,717	$	2,698
By Classification:
Policy fees	$	15	$	15
Net investment income		(1)		(12)
Net realized gains - excluding Fortitude Re funds withheld assets		1,448		440
Net realized gains on Fortitude Re funds withheld assets(a)		3,262		2,265
Policyholder benefits and claims incurred		(7)		(10)
Total	$	4,717	$	2,698

(a)Includes over-the-counter derivatives supporting the funds withheld arrangements with Fortitude Re and the embedded derivative contained within the funds withheld payable with Fortitude Re.